The National Residential Landlords Association (NRLA) has welcomed a landmark ruling from the Supreme Court which provides vital clarification about the responsibilities of so called ‘rent-to-rent’ companies.
The ruling in the case of Rakusen v Jepsen will have important implications for the private rented sector as a whole.
In the case, the landlord, Rakusen, agreed to let a flat to a rent-to-rent company. The property required a licence, but the company did not apply for one.
As a result of the failure to be licenced, the former tenants of the flat sought a Rent Repayment Order against Rakusen rather than the rent-to-rent company – even though he had not received rent directly from the tenants.
Rent-to-rent companies take over the running of a property for a landlord.
At an initial tribunal it was ruled that the Rent Repayment Order could be applied for against Rakusen. The Court of Appeal however later overturned the decision and ruled in Rakusen’s favour.
Yesterday, the Supreme Court has ruled that where rent-to-rent companies take over the running of a property, they cannot shirk responsibility and expect to leave the landlord to pay for their legal failings.
Ben Beadle, chief executive of the NRLA, said: “This case has never been about whether legal obligations should be met, but about who should be responsible for them in rent-to-rent cases.
“We therefore welcome today’s ruling which accepted many of the arguments made by the NRLA and provides important clarity for landlords and tenants alike.
“The ruling makes clear that it is the responsibility of rent-to-rent companies acting as a landlord to ensure that relevant legal requirements are met, since it is they who receive tenants’ rent. It is simply not right that such companies can take money from people without any responsibility for the property they are running.”
This is a great outcome for responsible landlords! Bravo to all the legal bods involved.
Rent to Rent is causing significant consumer lossess and the Rent to Renter can just walk away if the agreement fails.
I have heard many instances of deposits not being protected and being kept by the Rent to Renter at the end of the tenancy, tenants being charged a fee for “taking” the room, and, most commonly, the Rent to Renter holding on to the rent and not passing it on to the landlord and then disappearing.
I’ve also heard of a bizarre business model where the Rent to Renter sources a suitable property and charges an “investor” a fee for the deal, and also gets the investor to refurb the property in return for a share of the R2R margin. This is very dangerous to the investor as they are paying for to refurb a property they do not own and start out in a negative cash flow position that they may never regain.
There are also Rent to Renter deal sourcers who take fees for non-existent deals and then disappear.
A lot of these Rent to Renters appear to emanate from property “get rich quick” training courses where they are sold a dream of not needing any money to get involved in property, which, as we all know, is a complete fallacy.
These property trainers are turning out hundreds of Rent to Renters every month who do not have the finanical position to offer “guaranteed rent”, and who are not experienced enough to run a compliant tenancy, thereby putting landlords and tenants at risk.
Most of them are just naive people who bite off more than they can chew, but some of them see the easy money and get a taste for defrauding landlords and tenants.
I know of one Rent to Rent deal sourcer who has £17K of unsatisfied CCJs in both his personal name and administratively delinquent company name and has caused about £30K of investor losses that I am aware of, but he’s just started a new company and is carrying on un-checked.
The property trainers make millions from selling Rent to Rent courses, which enables them to use legal threats and action to shut down public interest commentary, one of the only things that currently creates awareness of the risks of illegitmate Rent to Rent arrangements.
We have one case being discussed on Property Tribes where the landord’s name was put on the ASTs for the sub-let, but the Rent to Renter wants to use the landlord’s name for court documents for rent arrears! A legitimate R2R arrangement is a management contract, not AST’s and, as the Rent to Renter guaranteed the rent, they are responsible for rental arrears and evictions, not the landlord.
If Rent to Rent is regulated, which seems to be on the cards, then this will have a knock-on impact to the property training sector, as they won’t be able to market it to vulnerable and naive people.
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A sensible decision for once.
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